Making an HDB Resale Transaction in Singapore: Should You Sell Your Newly-MOP Flat Now? (2024)
HDB resale transaction prices have steadily climbed. Since the end of the Circuit Breaker in 2020, HDB resale flat prices have increased and reached soaring heights. The latest HDB Resale Price Index is at an all-time high of 187.0 points, increasing 2.3% from Q1 2024.
As the owner of a freshly MOP-ed HDB flat myself, these are exciting times. With prices this lucrative, I can’t help but wonder: should I make an HDB resale transaction and sell my flat at the first opportunity?
As any sensible homeowner (albeit with slightly better connections) would do, I took my dilemma to the experts of PropertyGuru. If you want to sell your home too, you can look at the latest HDB transaction history or use home valuation tools to figure out how much to price your flat.
Selling Your MOP Flat Now Could Mean High Sales Profits
In 2017, I bought my 5-room BTO flat in Punggol for close to $460,000. Throw in renovations and furnishing costs, let’s put its cost at $500,000. The flat has fulfilled its Minimum Occupation Period (MOP) in 2022.
A look at the HDB transaction history show flats around my area are currently changing hands for upwards of $700,000. That’s why it can be tempting to sell your newly MOP-ed flat now to cash out on the high HDB resale flat prices.
Take me as an example: based off of HDB recent transactions, it’s likely I can sell my flat for $750,000. That means I can earn a tidy $250,000, fees and interest notwithstanding. With that kind of cash from my HDB resale transaction, I could possibly even buy a condo.
Which begs the next question: should I sell my flat and upgrade to private property?
Should You Sell Your MOP Flat to Upgrade to Private Property?
With a couple of hundred thousands more cash in hand, upgrading to a private property suddenly seems a lot more within reach. You may even be able to pay for the downpayment for a million-dollar home without tapping into your savings. Sounds like a dream, right?
Not exactly. There are many other factors to consider.
Firstly, while HDB resale transaction prices are at a high, they have yet to catch up with private properties. Not only are private properties more expensive, but interest rates remain elevated.
As of 16 September 2024, the lowest mortgage rate on the market is 2.50% for a 3-year fixed-rate home loan, just slightly lower than the 2.60% mortgage rate offered by HDB. However, floating rate home loans still see higher interest rates of about 3.80%.
Dr Tan Tee Khoon, Country Manager – Singapore, PropertyGuru said, “If you upgrade now, you must reckon with the higher prices of a private property and a higher interest-rate loan. If you don’t sell your HDB flat, then the Additional Buyer’s Stamp Duty (ABSD) for your second property will also prevail.”
That said, interest rates have come down from the highs observed in end-2022/early 2023 and begin to move sideways. In 2025, analysts do expect them to fall even further.
So, What Should You Do?
Depending on your personal priorities and aspirations, you can consider these options:
1. Upgrade Your Home Anyway
The first option is to sell your flat and upgrade anyway, as outlined above.
It really depends on the opportunity. For example, if you’ve found a property that you love, wouldn’t that influence your decision? What about a property that is attractively priced (after considering the area’s HDB transaction history)? Or near a school you want your child to go to?
Yes, private property prices are high and with the same budget, you can probably only afford a smaller unit. However, if upgrading is your goal and you’ve already found an ideal property to buy, now is not necessarily a bad time. You just need to make sure you can afford it comfortably.
2. Don’t Upgrade, Downgrade Instead
If your priority is to stretch the dollars from the sale of your MOP flat, you may want to consider doing the reverse – i.e., downsizing your home instead.
Dr. Tan said, “If you are willing to downsize, you may be able to borrow less or even pay for the property in full. Then, you can use the rest of your profits for other purposes, including growing your savings.”
For example, if I had $250,000 in sales proceeds after completing my HDB resale transaction, I might buy a 3-room flat that’s under 10 years old for around $500,000. If I use all the cash to pay what I can, my loan would only be for $250,000, which brings me closer to being debt-free.
Alternatively, I could borrow as much as possible (assuming a Loan-to-Value ratio of 75% for a bank loan or HDB loan) and use the excess cash to invest for possibly higher returns.
3. Sell Your Flat and Rent for Now
The third option is to sell your MOP flat while prices are high and rent a home while waiting for a better time to buy another property. Not only are interest rates expected to eventually fall, but property prices too (when the supply for private residential properties come back into swing).
After seeing elevated rental prices for much of the pandemic, rental prices for HDB flats and condos are finally trending downwards. ‘Downgraders’ can rent while they wait for their homes to be completed.
If you’re considering renting an HDB flat, look at the HDB rental transaction history for homes in the area. By knowing how much a rental unit is priced against recent HDB rental transactions, you are less likely to overpay for a unit.
Consider Your Home Loan Before Selling
According to HDB recent transactions, prices are already moving sideways. If you look at the HDB transaction history, you’ll find larger flat types in more central neighbourhoods being sold at high prices, propping overall HDB transaction prices up.
It may be very tempting to sell your flat now, but the ‘best’ move is subjective and highly dependent on your personal situation. In fact, the best way forward could even be to hold on to your flat.
This is especially if you’re currently enjoying a good interest rate on your home loan. An example is if you had taken up a mortgage in the past two years when rates were slashed to record-lows. If you’re in a similar situation, you are in a good position to wait things out.
“ Don’t upgrade for the sake of upgrading. Instead, you’d need to be critical about the new property you’re going to buy. With your current mortgage, you actually have acquired a relatively cheaper flat as compared to others who buy theirs now. You may have more palatable upside into the future,” said Dr. Tan.
The Right Decision Is Different for Everyone
As you can see, there are many factors to consider, and the decision of whether or not to sell your MOP flat is much more complex than it may seem. At the end of the day, it is important not to make any rash decisions.
Before you sell, you can look at HDB recent transactions on the HDB Portal to get a better idea of how much your home can fetch. Looking at the HDB transaction history will also allow you to better budget for your new home.
For more home financing advice, you may speak to PropertyGuru Finance mortgage experts (it’s free).
